Euro rises as French bond demand recovers; focus turns to ECB-Fed policy

• 1.1210 is within reach as EUR/USD edges higher, with the Euro outperforming its peers.
• France retained its Aa3 sovereign rating from Moody’s despite expectations of a downgrade.
• Unchanged interest rates are expected from both the Fed and the ECB this week.

EUR/USD is slightly higher at around 1.1210 in European trading on Monday. Some early gains have faded, although the Euro (EUR) remains stronger against its peers, including the US Dollar.

Aa3 Rating Retained: Support for the Euro

Buying interest in the Euro follows Moody’s decision to retain France’s Aa3 sovereign rating, contrary to expectations of a downgrade.

The decision late on Friday to retain France’s Aa3 sovereign rating and negative outlook defied "wide market expectations of a downgrade," according to analysts at Danske Bank. They say Moody's position assumes "that a deficit-reducing 2027 budget will be adopted and that financing costs and social tensions will abate somewhat in the coming months."

On the fiscal outlook, Danske Bank notes that Moody's now "expects a deficit of 5.2% of GDP next year, down from the 5.4% the government expects this year but slightly above its 5% target."

Although Moody’s retained the Aa3 sovereign rating, it warned that social unrest "could constrain fiscal consolidation efforts," and unrest persisted over the weekend. It was calmer than the previous week, but unions have already called a nationwide strike for 5 November.

Attention now turns to monetary policy decisions from the Federal Reserve (Fed) on Wednesday and the European Central Bank (ECB) on Thursday.

Neither central bank is expected to alter its current interest rates. Investors will scrutinise policy guidance and comments on whether energy supply shocks have begun feeding through to wages and wider consumer prices.

In eurozone data, Germany’s IFO Institute Business Climate Index delivered an unexpected improvement. The sentiment gauge rose to 90.2 in October from 89.9 in September, against expectations of a decline to 89.8.

1.1254 EMA Caps EUR/USD: Technical Outlook

At around 1.1212 on the daily chart, EUR/USD retains a bearish short-term bias below the 20-period exponential moving average (EMA) at 1.1254. Failure to regain this dynamic resistance suggests that recent declines continue to weigh on the pair. With the Relative Strength Index (RSI) near 39, below the neutral 50 threshold, recovery attempts appear modest within a broadly weak trend.

The 20-day EMA near 1.1254 marks the first resistance level. A sustained move above it would be required to relieve downside pressure and allow a more constructive corrective phase. No nearby support levels are mapped in the dataset, leaving the recent lows as an informal floor for now. Below that moving-average ceiling, the pair is likely to remain exposed to further declines.

(The technical analysis of this story was written with the help of an AI tool. Know more.)